1
Q
Revenue
Occurence
A
- Obtain sales subledger and select a sample of sales through year and obtain the sales order, packing slip and invoice and check amounts and shipping date to ensure sale occured
2
Q
Revenue
Completeness
A
*
3
Q
Revenue
Cut-off
A
- Select a sale of sales that occurred within last few weeks of the year and obtain sales order, invoice and packing slip to ensure the items were shipped in correct period
4
Q
Cash
Existence
A
- Review the cash accounts in the general ledger for unusual items, such as new and significant accounts, accounts with negative balances, or more than one account with identical balances. Agree these items to bank confirmations to determine whether the amounts exist.
5
Q
Cash
Rights and obligations
A
- Obtain debt agreements and recalculate covenants to determine whether the company is in compliance with requirements and whether the bank has the right to any collateral that was pledged
6
Q
Cash
Completeness
A
- Obtain bank statement and confirm the amount to the cash balance on financial statements
7
Q
A/R
Accuracy
A
- Agree the amounts included in AR listing to cash receipts through the back account to ensure amounts are accurate
*
8
Q
A/R
Existence
A
- Select a sample of AR balances at year end from the AR listing.
- Send positive AR confirmations to the customers to confirm the existence of the amounts listed as owing.
- Inspect the customer file for payments received subsequent to year end and agree the receipt of funds to the deposit in the subsequent bank statement to determine if the amounts were likely receivable at year end.
9
Q
A/R
Valuation
A
- Examine accounts aged greater than 90 days and compare them to receipts subsequent to year end. If the account was not paid, discuss with management and consider a specific account write-off, examine the bad-debt expense policy, and ensure that the estimate was calculated properly by recalculating the allowance for doubtful accounts to determine if the appropriate amount has been recorded for net AR.
- Recalculate foreign-currency denominated AR accounts and amounts using the appropriate year-end foreign-exchange rate and compare them to the amount recorded in the general ledger to determine if the amount recorded is appropriate or not.
10
Q
A/R
Completeness
A
- Obtain a listing of cash receipts received subsequent to year end and select a sample from these cash receipts. For the sample selected, agree the receipt back to the related sales invoice / shipping documentation and inspect the description / transaction date on the invoice to determine which period the transaction related to. Trace the transaction back to the year-end AR listing to determine if the amount was appropriately included in the AR balance at year end or not.
11
Q
Inventory
Existence
A
- Attend the year-end inventory count and select a sample of items on the inventory listing. Vouch inventory items included on the listing to inventory that has been physically counted on the warehouse floor (perform “sheet-to-floor” test counts) to verify that the inventory items actually exist.
12
Q
Inventory
Valuation
A
- Select a sample of items from the inventory listing. For the sample selected, inspect a recent sales invoice and recent purchase invoice, comparing them to the per-unit net book value of the items to determine whether the cost is lower than NRV and whether the item has been recorded at the appropriate value.
- For raw materials, compare inventory net book values with quoted commodity prices on the year-end date to determine whether there has been a significant decline in the value of the raw materials.
- During the inventory count, look for dusty, unused, or discarded inventory to determine whether any items may be overvalued and require a write-down to NRV. Inquire of management whether there are any damaged, slow-moving, excess, out-of-style, or obsolete inventory items to determine whether any inventory items may be overvalued and require a write-down to NRV.
13
Q
Inventory
Rights and obligations
A
- Inquire whether the company has any consignment inventory and whether it has been excluded from the inventory listing. Inspect the inventory listing for evidence of inclusion of any goods held on consignment for third parties. Review board meeting minutes for evidence of consignment relationships.
14
Q
Inventory
Completeness
A
- Attend the year-end inventory count(s) at the various locations (including locations where significant inventory is held by third parties) and select a sample of inventory items from the warehouse floor. Agree these items to the inventory listing to ensure the inventory records are complete
- Inquire whether the company has any consignment inventory at other locations and whether that inventory has been included in the inventory listing.
15
Q
PPE
Existence
A
- Select a sample of equipment items from the account balance listing and inspect the equipment to see if it exist and agree the serial code on the account listing to the physical item to confirm if it is the correct instance
- Select a sample of additions from the PPE listing and trace the amounts to supporting invoices. Examine the nature of each expenditure to determine whether the amount meets the definition of an asset (that is, it increases the useful life of the asset, or provides an increase in future cash flows or reduces related operating costs).
- Select a sample of asset additions and physically inspect that the assets exist.
16
Q
PPE
Valuation
A
- For a sample of items on the PPE listing, recalculate depreciation expense based on the stated depreciation policy. Compare to the client’s calculation of depreciation to determine whether it is reasonable.
- Compare the current depreciation policy with the prior year to look for significant changes. Inquire whether the depreciation policy has changed. If it has, examine evidence to support the change (such as reviewing communication from engineers indicating the change in expected useful life of a piece of equipment) to determine whether the new depreciation method is reasonable.
- Obtain management’s documentation of their impairment test and examine major assumptions for reasonability (for instance, recheck the black book value of the equipment, review board of directors meeting minutes for evidence of plans to discontinue using equipment, and review changes in the entity’s strategy or product mix). Recalculate the impairment (depending on the financial reporting framework) to determine whether an impairment should be recorded (or to verify the amount that was recorded).
- Research the black book (market) value of the equipment and verify whether it is less than the book value.
17
Q
PPE
Completeness
A
- Select a sample of repair and maintenance expenses from the general ledger and trace to invoices — inspecting the invoices to verify the nature of the costs — to determine whether the items should have been capitalized as assets.
18
Q
A/P
Completeness
A
- Request a listing of cheques written since year end (known as a cheque run). Select a sample of cheques from the cheque run, vouch the cheques to the related invoices and inspect when the related goods/services were provided. Trace the payments to the general ledger to determine whether or not they were appropriately included on the AP listing at year end.
- Select a sample of vendors with low or nil balances and send positive confirmations (ones that require a response). Compare the confirmed balances to the balances in the AP sub-ledger.
- Select key vendors with low or nil balances and send a positive confirmation to each vendor. Compare the confirmed balances to the balances per the AP listing. Investigate any differences.
19
Q
Sales
Occurence
A
- Select a sample of general ledger sales entries, trace them back to the related shipping documents and sales invoices, and examine the dates on these documents to determine whether the sale was recorded in the correct period.
- Select a sample of shipping documents before and after year end, trace them to the related sales invoices and general ledger entries, and compare the dates to determine if the sale was recorded and in the correct period.
20
Q
Sales
Accuracy
A
- Select a sample of general ledger sales entries, trace them back to the related sales invoices, and determine whether the sales transactions were recorded at the correct amounts by comparing the sales price to the approved price list.
- Select a sample of manual sales transactions from the general ledger and determine whether the transactions have been recorded at the correct amount by recalculating the sales amounts using the sales price per the approved price list.
21
Q
Cost of Sales
Accuracy
A
- Select a sample of COS transactions from the general ledger and determine whether inventory purchases have been recorded at the correct general ledger accounts and at the correct amounts by comparing the recorded amount against the purchase invoice amount.
- Select a sample of general ledger COS transactions and determine whether inventory purchases and COS have been appropriately translated into Canadian funds by comparing the rate used in the translation to the published rate.
- Select a sample of U.S.-dollar COS transactions from the general ledger and determine whether purchases and COS have been appropriately translated into Canadian funds by comparing the rate used to the appropriate published exchange rates.
22
Q
Cost of Sales
Completeness
A
- Select a sample of purchase invoices, both before and after the period end, and ensure the transactions were recorded in the appropriate period by comparing the date of the purchase transaction in the general ledger to the purchase invoice.
- Select a sample of shipping documents from before and after year end and trace them to the related sales invoices and general ledger entries. Compare the dates to determine whether the sale and the related cost were recorded, and whether they were recorded in the correct period.
23
Q
Expense
Accuracy
A
- From the general ledger, select a sample of expense transactions and determine whether purchases have been recorded at the correct amounts by comparing the recorded amount against the purchase invoice amount. Check the coding of the expense in the entry against the master general ledger (GL) code listing to ensure it was recorded into the correct account.
- From the GL, select a sample of foreign-currency-denominated expense transactions and determine whether purchases have been translated into Canadian funds appropriately by comparing the rate used to the appropriate published exchange rates. Recalculate the translated amount.
24
Q
Expense
Cut-off
A
- Select a sample of general ledger entries for online sales, trace them back to the shipping documents and sales invoices, and examine the dates on these documents to determine whether the sale and COS were recorded in the correct period.
